Solid UK housing market to see prices continue steady year on year rises
A new forecast from the Office for Budget Responsibility (OBR) suggests that while property price growth in the UK is set to slow, values will continue steadily upwards year on year.
Compared to the last guidance issued in March the OBR has made a number of revisions to its forecasts, noting that both house price growth, sales and stamp duty tax receipts are expected to slow.
The OBR expects values will end 2016 up by 6.6% annually and in 2017 price growth will slow to 3.4% before rising again to 4.4% the following year. Overall the cumulative growth in house prices between the second quarter of 2016 and the first quarter of 2022 is forecast to be 28.5%.
This suggests that despite Brexit and expected uncertainty during the years it will take the UK to be disconnected from the European Union, the fundamentals of the housing market remain largely unchanged and will continue to underpin prices.
According to real estate firm Knight Frank one reason for the short term slowdown in house price growth is weaker than expected market activity, with transactions revised slightly down, compared with the OBR’s March forecast.
The OBR also revised its forecasts for stamp duty receipts. The property tax is forecast to raise £8.1 billion in 2016/2017, rising to £13 billion in 2021/2022. The forecast report suggest that revenue so far this year has been much weaker than expected, in part due to the drop in sales of properties worth over £1 million.
This is interesting as the property industry has being saying for some time that higher stamp duty announced two years ago for properties at the higher end of the market have had more of an affect in slowing the sector than anything else, including uncertainty surrounding Brexit.
Indeed, there was a lot of lobbying of the Chancellor ahead of this week’s autumn statement for stamp duty to be reduced at the upper price end of the market to stimulate growth but he did not make any changes.
The OBR also issues its forecast for receipts from the 3% surcharge that came into effect in April for additional homes, mainly buy to let properties and second homes. The figure has save been revised up, suggesting that the tax is not having a negative effect.